Employment 2019 Second Edition

Last Updated August 14, 2019

Finland

Law and Practice

Authors



Dittmar & Indrenius has an employment, benefits & pensions practice that is the leading and one of the largest employment law practices in Finland. Throughout the years, the firm has been engaged in many of the highest-profile employment law cases in the Finnish market. The practice consists of 14 associates and three partners who provide insightful, practical and holistic legal advice to corporate clients. The practice is best known for serving clients in a wide range of complicated employment law issues, ranging from reorganisations to employment disputes, M&A to compensation schemes, collective employment law to posting of employees and pensions to discrimination issues. One of the practice's key strengths is its close co-operation with, for instance, Dittmar & Indrenius' tax, data protection and M&A practices. The firm offers clients 'one-stop shop' legal services and out-of-the-box solutions that are not limited to employment law.

In Finland, there are no statutory definitions of blue-collar and white-collar workers. In general, the Employment Contracts Act defines the characteristics of an employment contract; an agreement to personally perform work for an employer under the employer's direction and supervision in return for pay or some other remuneration. Labour laws, which regulate the statutory employment rights, will be applied to the employment relationship if the above-mentioned prerequisites are met. Therefore, the same legislation is applied to all employees.

However, different collective agreements are applied to blue-collar and white-collar workers. Also, white-collar workers are further divided into salaried and senior salaried staff.

The main rule is that an employment contract, full or part-time, is valid until further notice unless there is a justified reason to conclude the contract for a fixed term. Such a justified reason relates to, for example, substitutes, seasonal work and project work. However, an employer may enter into a fixed-term employment relationship with an employee without a justified reason if the person has been an unemployed job-seeker during the preceding twelve months with a maximum of two weeks' interruption.

Employment contracts do not have to be concluded in any specific form in order to be valid. It is, however, customary and recommended to have written employment contracts. This is partially due to the fact that the employer has in any case a statutory obligation to provide the employee with a written statement of the principal terms of work. The information on the principal terms of work includes the following: the domicile or business location of the employer and the employee; the date of commencement of the work; the duration of a fixed-term employment contract and the justification for such contract; the possible trial period; the place where the work is to be performed; the employee's main duties; the collective agreement applied in the employment relationship; the grounds for determination of salary and the pay period; the regular working hours; the ground for determination of annual holiday; the notice period; and, if the work is performed abroad for a minimum period of one month, the duration of the work, the currency in which the monetary pay is to be paid, the monetary remunerations and fringe benefits payable abroad, and the terms for the repatriation of the employee.

To be valid, an employment contract does not have to be in Finnish or Swedish as long as the employee understands the language of the contract.

Working hours reform has taken place in Finland and the new Working Hours Act will enter into force on 1 January 2020. The key changes of the reform relate, inter alia, to flexible working time arrangements, working time banks, tighter rest time rules, as well as the general scope of application of the Working Hours Act. Thus, many employers will have to revise their working time policies and practices.

An employee's regular working hours must not generally exceed eight hours a day and 40 hours a week. By collective agreement, the regular weekly working hours can also be arranged in such a way that the average is 40 hours over a period of no more than 52 weeks. However, it is customary that the regular working hours for white-collar employees are 7.5 hours a day and 37.5 hours a week in accordance with the general practice set forth by collective agreements. Flex time is widely used among white-collar workers.

It is possible to conclude a zero-hour employment contract, in which the employee undertakes to perform work for the employer when separately asked to do so, and a variable working hours contract. However, employers cannot propose such working hours should they have a permanent need for labour; thus, the need for labour must in reality vary. In addition, the minimum amount of the working hours cannot be lower than the employer's actual need for labour. The employer must provide the employee with a written statement containing an estimate of the anticipated amount of working hours.

In addition to regular working hours, employees may perform additional or overtime work. Additional work refers to work done on top of the regular working hours on the employer's initiative but not exceeding eight hours per day and 40 hours per week. The employee is paid their normal hourly rate for the additional work.

Overtime work comprises working hours in excess of regular hours and possible additional hours. Overtime work can only be performed on the employer's initiative and with the employee's consent. In general, the consent must be obtained separately each time and therefore the employee cannot agree to perform overtime work in an employment contract.

Under the Working Hours Act in force until the end of 2019, the maximum amount of overtime work is 138 hours during a four-month period and 250 hours in a calendar year. The employer and the employee representatives or personnel can also agree on additional overtime work up to 80 hours in a calendar year, provided that the maximum of 138 hours of overtime work in a four-month period is not exceeded. The new Working Hours Act applicable from the start of 2020 will limit working time including overtime to 48 hours per week on a four-month reference period.

All employees to whom the Working Hours Act is applied are entitled to overtime pay. For example, the act is generally not applied to executive managers in leading positions. The employee's pay must generally be raised by 50% for the first two hours of daily overtime work and by 100% for the hours thereafter. Hours exceeding 40 weekly working hours and that are not considered as daily overtime must be compensated by a 50% pay increase. Alternatively, it is possible to agree that overtime will be compensated as corresponding free time during regular working hours.

Please note that the applicable collective agreements typically include detailed provisions regarding working hours.

Minimum wages are not regulated in Finnish law but it is common that collective agreements determine the minimum wage requirements as well as the amount of wages in general. Should no collective agreement be applied to the employment relationship, remuneration can be agreed between the employer and the employee. This is usually the case with senior-level employees.

It is still quite common that an employee receives a monthly fixed salary or hourly wages. However, it is also possible that compensation is based on the employee's performance; ie, as incentive bonus. For sales work, the compensation is usually a combination of a monthly fixed salary and commission. It is becoming more popular that the compensation is tied to achieving the company's or its units' performance targets. Seniority increments are common and there are other different increments that may increase the compensation, such as language increment.

Thirteenth-month payments are not normally applied in Finland; however, some employers may reward their employees with an annual bonus if the company has performed well. Offering bonus schemes in general varies a lot and becomes applicable normally with senior-level employees.

There is no government intervention regarding wage increases but they are based on collective agreements.

It should be noted that Finnish law includes several provisions regarding situations where the employee is entitled to their pay without performing work. Such situations relate to, for example, sickness and annual holiday.

Vacation

The Annual Holidays Act establishes the right to paid annual holiday. The holiday accrual year runs from April 1st to March 31st. When employment has lasted less than a year by the end of the accrual year, the employee accrues two days of paid holiday per each full month worked. Thereafter the employee accrues two-and-a-half days' paid holiday per each full month worked. In general, a full month is typically a month during which the employee works at least 14 days. It should be noted in this context that employees continue accruing holiday during many absences. The total number of paid holidays is 30 days per year, equivalent to five weeks of annual leave. The holiday season runs from May 2nd to September 30th.

An employee may request that his or her holidays will be postponed to a later date when he or she has been incapacitated to work during the annual holiday. The postponing may be requested for exceeding six holidays, which are regarded to be the employee's own risk. Due to implementation of EU legislation in 2019, employees are in general able to take additional holiday if they have earned less than 24 days of annual leave because of absence from work due to sickness, accident or medical rehabilitation.

The main rule is that an employee takes annual holiday at a time determined by the employer. The employer must inform the employees of the general principles regarding the granting of annual vacation and the employees must be given the opportunity to present their opinion regarding the time of their vacation. The employer must take these opinions into consideration to the extent possible and follow equality when timing the holidays.

Four weeks or 24 days of the holidays shall be granted during the holiday season and the rest of the holiday, known as 'winter holiday', shall be granted prior to the commencing of the next vacation year. As a main rule, the holidays should be granted continuously. An employee has a limited right to save his or her holidays for the upcoming year.

The employer may determine that the employee shall keep the accrued but unused annual holidays during the notice period to the extent permissible according to the Annual Holidays Act. Unused holidays shall be paid to the employee at the termination of the employment. Please note that the accrued but unused holidays may be paid out only at the termination of the employment, not during the employment relationship.

Vacation Pay

During the annual leave, employees are entitled to receive their regular or average pay. The vacation pay may be calculated in several ways and the calculation method is determined on the wage basis. In general, the vacation pay must be paid prior to the vacation.

Paying holiday bonus is very common practice in Finland. Many collective agreements have provisions regarding holiday bonus and even companies that are not covered by collective agreements grant the holiday bonus quite often. The holiday bonus is 50% of the holiday pay.

Parental Leaves

The Employment Contracts Act sets out the right to several different types of family leave, such as maternity, special maternity, paternity, parental and childcare leave. All family leaves are unpaid unless pay is prescribed in an applicable collective agreement. During maternity, paternity and parental leave the employee is entitled to parental allowance provided by Kela, the Social Insurance Institution.

An employee is entitled to 105 days of maternity leave, which typically begins 50 to 30 days before the expected date of birth. Kela grants the employee an earnings-related maternity allowance during the maternity leave. In cases where the work may endanger the fetus or the mother, the employee may be entitled to special maternity allowance.

Lately, there has been a lot of political discussion on sharing of the burden of childcare more equally between the parents. Paternity leave can last up to 54 weekdays. Fathers may take paternity leave for a maximum of 18 days during the mother's maternity leave. It is common practice that the father uses a part of the paternity leave right after the birth of the child, since paternity leave can be divided into shorter periods. An earnings-related paternity allowance will be paid during the paternity leave. The entire paternity leave must be taken before the child turns 2 years of age and it cannot be assigned to the mother.

When the maternity leave has ended, either parent can take parental leave to look after the child up to a maximum of 158 working days. Parental leave can be shared between the mother and the father. An earnings-related parental leave allowance will be paid during the leave.

An employee with childcare responsibilities is entitled to full-time childcare leave until their child or a child living permanently in their household reaches the age of 3. However, only one person with the care and custody of a child can take the leave at a time, except when the other is still on maternity or parental leave. Kela provides an allowance to employees taking childcare leave.

An employee who has been employed by the same employer for a total period of at least six months is entitled to partial childcare leave until the end of the second year of the child's basic education or until the child is 18 if the child has special needs. Partial childcare leave means reduced working hours.

Following the parental leave, the employee is entitled to return primarily to his or her former duties.

Sick Leave

An employee who becomes temporarily incapable to work is entitled to full sick pay up to the ninth day following the first day of disability if he or she has been employed by the employer for over a month. If the employment relationship has lasted less than one month, the employee is correspondingly entitled to 50% of his or her pay. However, collective agreements typically include provisions on sick pay entitling employees to full pay for a longer period. The employee is not entitled to sick pay if the incapacity was caused recklessly or intentionally by the employee.

Employees typically have a right to sickness allowance, which is paid by Kela. Sickness allowance is paid after the nine-day period specified above. The sickness allowance may be paid for up to 300 days including other weekdays except for Sundays.

Limitations on Confidentiality

As a general rule, the employee has a statutory obligation to keep the employer's trade and business secrets confidential during the term of employment. If the employee has obtained such information unlawfully, the prohibition continues after the termination of employment. The employer and employee may agree that the confidentiality obligation remains in force also after the termination of employment. However, the agreement cannot restrict the employee's fundamental right to work and the freedom to engage in commercial activity too excessively.

During the employment, employees have an obligation to avoid everything that conflicts with the actions reasonably required of employees in their position. This is normally regarded as flowing from the employee's general loyalty obligation towards the employer and thus non-disparagement clauses are not commonly used in employment agreements. In contrast, non-disparagement clauses are common in severance agreements.

Employee Liability

The main principle is that an employer is vicariously liable to pay damages for injury or damage caused by its employee through an error or negligence at work. An employee is liable in damages for injury or damage caused by him or her up to an amount deemed reasonable in view of the extent of the injury or damage, the nature of the act, the status of the person causing the injury or damage, the needs of the person suffering the same and other circumstances. If the negligence of the employee has been merely slight, he or she shall not be rendered liable in damages. In principle, the employer is always liable to pay the damages for the suffered third party and it may be possible for the employer to claim the damages from the employee if he or she has acted wilfully or negligently.

Finnish employment law limits the use of non-compete clauses. For a non-compete clause to be valid, there must be 'particularly weighty' reasons that reflect a justified interest of the employer to prevent a departing employee from working for a competing business. When assessing the validity of a non-compete clause, criteria such as the nature of the employer's operations, the need to ensure the protection of trade secrets, special training provided to the employee by the employer, as well as the employee's status and duties are evaluated.

Such agreement is usually considered valid, for example, if the employee's duties relate to product development, research or other similar activities and the employee possesses information and know-how that is not in the public domain. In general, the use of a non-compete clause is easier to justify with the key personnel of the company. However, Finnish courts have set the bar quite high when determining the validity of non-compete agreements and the political atmosphere in Finland seems to increasingly disfavour the enforceability of non-compete clauses.

A non-compete agreement may restrict the employee's right to engage in competing activities for a maximum period of six months from the termination of the employment. However, the period may be extended to a maximum of one year if the employee receives a fair compensation. The fair compensation is not defined in the law and, thus, the amount is always determined on case-by-case evaluation. Generally, the compensation has amounted to between 50% and 100% of the employee's last monthly salary for each month exceeding the non-compensated first six months.

The non-compete agreement is usually combined with a contractual penalty. Breaches of the non-compete undertaking may be penalised with a contractual penalty amounting to a maximum of the employee's six months' salary preceding termination. The contractual penalty is subject to an agreement. In the absence of an agreement, general tort law is applied to the breach.

The restrictions mentioned above do not apply to employees who are considered to be engaged in the management of the company or an independent part of it, or have an independent status comparable to such positions. A managing director is always excluded from the statutory restrictions. It should be noted, though, that non-competes are always subject to a general reasonability review.

There are no specific statutory restrictions relating to other post-termination covenants, such as non-solicitation of customers and employees, whereas they are subject to agreement between the employer and the employee. However, non-solicitation clauses generally follow the same time limitations set forth in the non-compete clauses since under certain circumstances the non-solicitation obligation may be deemed to constitute a non-competition undertaking. As a general rule, restrictive covenants may be considered unreasonable and therefore invalid if concluded for a long period without acceptable grounds. The agreement shall not restrict the employee's fundamental right to work and the freedom to engage in commercial activity too excessively.

The General Data Protection Regulation (GDPR) is applicable in Finland and it lays down the general rules applied to the processing of employee data. Despite the entry into force of the GDPR, the exceptionally strict Finnish national legislation on the protection of privacy in working life remains in force with minor changes.

There are two main national laws specifically governing the processing of personal data in working life. The Act on the Protection of Privacy in Working Life applies specifically to employment relationships. The new Data Protection Act specifies and supplements the GDPR and its national application. In addition, the Electronic Communications Services Act regulates issues relating to spatial data concerning an employee and confidentiality of communication.

As a general rule, the employer is bound by a strict necessity requirement regarding the collection and processing of personal data of its employees. The employee data shall be directly necessary for the employee's employment relationship. The necessity requirement is strict and cannot be deviated from, even with the employee's consent.

Finnish data protection law includes provisions on specific categories of data and situations for processing personal data, personality and aptitude assessments, camera surveillance in the workplace, retrieving and opening employees' emails, and special rules regarding job applicants.

A residence permit is generally required for working in Finland. EU or European Economic Area (EEA) citizens do not require residence permits to stay and work in Finland but they must register their right to reside in Finland if their stay exceeds three months. Citizens of other countries must obtain a specific residence permit for an employed person.

An employer must provide written information to an application for a residence permit on principal terms of employment and an assurance that the terms comply with existing legislation or a collective agreement. Upon request of the Employment and Economic Development Office, the employer must also attach a statement confirming that it will meet its employment-related obligations to the application.

The employee must be able to earn his or her living through employment throughout the time when the residence permit is valid.

Nevertheless, foreign workers have a right to work in Finland without a residence permit if they are permanent employees of a company operating in another EU or EEA state and they perform temporary contracting or subcontracting. These employees must hold permits that entitle them to reside and work in another EU member state and the permit must stay in force until the employees have finalised their work in Finland.

The Posted Workers Act contains specific provisions relating to workers who are posted to Finland.

An employer has an obligation to confirm that the employed foreigner has the required residence permit for an employed person or that the foreigner does not need a residence permit.

An employer who employs a person who is not an EU or EEA citizen shall generally submit a statement of the essential terms of employment and a confirmation that it will meet its employment-related obligations to the Employment and Economic Development Office. The submitting shall be made without delay. The employer must also inform the shop steward and industrial safety delegate at the workplace of the foreigner's name and of the applicable collective agreement.

An employer who deliberately or through negligence employs a foreigner who does not have the right to employment can be given a fine for an employer's violation of the Aliens Act. In addition, an employer who hires or employs a foreign national not in possession of a residence permit for an employed person, or otherwise in possession of a permit to work in Finland, can be sentenced for unauthorised use of foreign labour and given a fine or up to a maximum of one year's imprisonment.

The main function of trade unions is to safeguard and improve the benefits and rights of their members. Trade unions negotiate collective agreements with the employers and their associations.

Each personnel group is entitled to select a representative among themselves to represent the employees in collective or individual matters. However, this is not mandatory and often the employees of smaller companies do not select a representative at all. There is not a statutory obligation to set up a works council either, except for European companies (SEs).

Generally, employees within a scope of application of a collective agreement are represented by a shop steward. The shop steward represents the trade union, the applicable collective agreement and the employees. Shop stewards are elected by the employees who are members of the labour union.

If the employees have not selected a shop steward, it is typical that a case-specific employee representative is selected for each consultation. All employees in the particular personnel group should have a possibility to take part in the election process and they should all understand to what role the representative is elected.

An industrial health and safety delegate must be elected in workplaces with at least ten permanent employees. The delegate represents the employees and an industrial safety manager represents the employer in matters related to occupational safety and health.

At companies regularly employing more than 150 employees in Finland, the employees are, upon request, entitled to appoint representatives to one or more decision-making executive, supervisory or advisory bodies that handle important issues relating to the company's business, economy or the position of the personnel. Altogether, one to four personnel representatives may be nominated to such bodies. The employer and the employee representatives may deviate from the above-mentioned rules by concluding a specific agreement.

Collective agreements, which are negotiated between trade unions and employers' organisations for a particular trade or industry, play a central role in the Finnish labour market system. Collective agreements specify the minimum terms and conditions of the employment relationship. Collective agreements typically contain detailed provisions on minimum pay, working hours and overtime, the employer's obligation to pay salary due to illness and parental leave. Thus, the employer can not only observe the employment legislation but attention must be given to any applicable collective agreement. Typically, the provisions of collective agreements supplement the statutory provisions by providing the employees better rights and benefits compared to those set out in mandatory legislation.

An employer that is a member of an employer organisation that is a party to a collective agreement must apply the provisions of the collective agreement to the employment relationships of all its employees. The important point to note is that in order to be bound by a collective agreement, an employer does not necessarily have to be a member of the employer's organisation that is a party to the agreement. This is due to the fact that certain collective agreements can also be declared generally applicable, provided that the agreements are considered representative in the specific business sector in question. These collective agreements must be applied as minimum conditions of employment to all employment relationships in the sector concerned. Strikes and other industrial actions directed against industrial peace are prohibited during the validity of the collective agreement.

Collective bargaining takes place both at industry and company level. The most significant collective agreements are negotiated at industry level, while local agreements are negotiated within companies. Local agreements are allowed to the extent permissible by the applicable collective agreement. Local agreements aim to ensure the flexibility of terms of employment and to improve the competitiveness of companies.

The grounds for dismissal are regulated in the Employment Contracts Act. As a general rule, the employer must always have a proper and weighty reason for the termination. The act separates individual grounds and collective grounds. Individual grounds relate to the employee's person, conduct or performance whereas collective grounds relate to the financial or business situation or reorganisation of the company.

There are different procedures depending on the grounds for dismissal. First, the employer may have a legal right for termination on individual grounds if the employee neglects or seriously breaches the duties that are fundamentally related to his or her employment, or if there is such an essential change in the conditions of the employment that leads to a situation where the employee is no longer capable of performing his or her duties.

The law does not set out a list of acts or omissions that can always be considered as legal grounds for dismissal. Instead, the law provides a list of acts that do not in any case constitute grounds for dismissal, such as political activity of the employee. Sufficient grounds for dismissal may relate to, for example, long and unauthorised absence from work, improper behaviour or dishonesty, or use of intoxicants when the aforementioned lead to concrete breaches of obligations determined in the employment contract or legislation.

It should be noted that dismissal based on poor performance is legally more challenging since it rarely corresponds to any concrete breach of an obligation. The sufficient grounds vary and a case-by-case analysis must be made. As of 1 July 2019, the number of employees employed by the company must be taken into account in the assessment. Thus, the threshold for terminating employment on individual grounds is deemed to be lower for smaller companies.

Typically, a termination on individual grounds requires a prior warning to be issued to the employee. The employee must understand that if he or she does not change his or her conduct, this may lead to a termination. A warning is not necessary if an employee must have understood the severity of the matter without one. As is clear, this kind of requirement is vague and open to interpretation. Therefore, issuing a warning first to a negligent employee or an employee breaching his or her duties is generally advisable instead of immediately terminating his or her employment contract in order to minimise the risk of future claims.

When terminating the employment on individual grounds, the employer must provide the employee with a written notice of termination and the employee must be heard on the grounds for termination prior to the dismissal.

Legal grounds for terminating an employment contract on collective grounds generally exist if the work has diminished or been materially reduced due to economic or production-related reasons, or due to the restructuring of the enterprise and the reduction of work is permanent. A precondition for the termination is that the employee cannot reasonably be repositioned or retrained within the company. The repositioning obligation continues throughout the notice period and it can, under certain circumstances, also be extended to the employer's subsidiaries, even in other countries. It should be noted that hiring new employees before the dismissals or immediately afterwards typically discredits any terminations on collective grounds.

The consultation and notification procedures for dismissals based on collective grounds depend on the size of the employer. The Act on Co-operation within Undertakings is applied to companies that regularly employ at least 20 employees; smaller employers fall outside the scope of the application. Small employers have a rather simple consultation obligation set out in the Employment Contracts Act. Accordingly, an employer that intends to dismiss an employee on collective grounds must discuss as far in advance as possible the reasons for the termination with the employee in question and the alternatives, as well as the employment services available from the Employment and Economic Development Office.

The main principle of the Act on Co-operation within Undertakings, which applies to employers employing at least 20 employees regularly, is that employers are not entitled to make final decisions on redundancies or major business decisions resulting from them before fulfilling their duty to negotiate with the employee representatives. Thus, the consultation process must be carried out already when the employer is considering business decisions that may lead to redundancies.

When an employer is considering terminations or lay-offs of one or several employees or changing employment contracts into part-time contracts, it shall issue a written proposal for co-operation negotiations at least five days before the commencement of the negotiations. The proposal shall include at least the commencement time and place of the negotiations as well as an outline of the suggested agenda to be handled in the negotiations. The employee representatives must be given the necessary information relating to the contemplated redundancies before the co-operation consultation. The employer must also inform the local employment authorities of the consultation procedure relating to the possible reduction of workforce.

The negotiations shall be carried out with the representatives if the different personnel groups within the company have selected employee representatives. Otherwise, the employer must negotiate with the entire staff. During the co-operation consultation, the parties must discuss the grounds for, the effects of and the alternatives to the planned redundancies, as well as the possibility of retraining and repositioning the employees instead of dismissal.

Failure to conduct the co-operation consultation procedure will not make the dismissal itself unfair, but can result in compensation up to a maximum of EUR34,519 for each affected employee. The consultation obligation can be met even if the employer and the employee representatives do not reach a unanimous result provided that the provisions of the Act on Co-operation within Undertakings have been complied with. The employer should keep a record of the negotiations in order to be able to prove later that the consultation process was carried out sufficiently.

After the co-operation consultation process, the employer may decide the employees to be dismissed but the choice shall not be made on discriminatory grounds. Also, some collective agreements may include provisions regarding the choice of the employees to be dismissed and these provisions need to be taken into account when making the decisions.

If an employer regularly employing at least 30 employees dismisses an employee whose employment relationship has lasted at least five years, the employer shall offer the employee an opportunity to take part in training or outplacement services at a value corresponding to the employee's monthly salary or the average monthly earnings of personnel at the same place of work as the employee given notice, whichever is the greater.

Please note that an employer has a re-employment obligation. The employer must offer work to a former employee whose employment has been terminated on collective grounds and who continues to seek work via an employment office, if the employer within four months of termination of the employment relationship needs new employees for the same or similar work that the dismissed employee performed during his or her employment relationship. However, if the employment relationship has lasted for at least 12 years prior to its termination, the length of the re-employment period is six months. Please also note that certain collective bargaining agreements contain a nine-month re-employment period.

The employees who are dismissed on collective grounds must be given a written notice of termination and the employee must receive an explanation as to the reasons and options for the termination prior to the dismissal.

In general, it is advisable to deliver the notice of termination personally to the employee. If personal delivery is not possible, then the notice can be sent via mail or email.

Unless otherwise provided in the applicable collective agreement, the parties to an employment relationship can agree on the notice period in the employment contract. However, the maximum length of the agreed notice period shall be six months. The notice period applicable for the employer must not be shorter than the one applicable for the employee. Should the period of notice not be agreed or set out by a collective agreement, the statutory notice periods shall be applied.

The following employer's statutory notice periods are based on the length of the employment relationship:

  • up to one year's employment – 14 days;
  • one to four years' employment – one month;
  • four to eight years' employment – two months;
  • eight to 12 years' employment – four months; and
  • over 12 years' employment – six months.

The following employee's statutory notice periods are based on the length of the employment relationship:

  • up to five years' employment – 14 days; and
  • over five years' employment – one month.

There is no statutory obligation to pay severance but the applicable notice period must be observed. During the notice period, the same terms and rules of the employment relationship continue and the employee is entitled to his or her normal salary and benefits. However, the employer may unilaterally decide to release the employee from his or her obligation to work during the notice period. It should be noted that releasing the employee from his or her obligation to work does not change the fact that the employee is still entitled to his or her salary and benefits.

Additionally, if an employment relationship has lasted for at least five years prior to the termination on collective grounds, an employer with at least 30 employees is required to offer the dismissed employee occupational health services for a maximum of six months after the termination of employment or until the employee finds a new job.

Termination of employment without notice requires an extremely weighty cause, which may be deemed to exist if the employee commits such a fundamental breach of his or her employment contract, and it is unreasonable to expect that the employer would continue the employment relationship, even for the period of notice. In the case of a summary dismissal, it is of high importance that the employer acts swiftly, since the summary dismissal must be carried out within 14 days from the date when the employer became aware of the grounds for the dismissal.

As mentioned above, the criteria for the summary dismissal are high. Therefore, in order to minimise the risk of committing an unlawful dismissal, it is common that the employer still chooses to terminate the employment contract in severe beaches instead of carrying out a summary dismissal.

The notice of summary dismissal shall be given to the employee the same way as in other termination cases. Summary dismissal shall be deemed effected when the employee receives the notification. When the employment ends immediately after the summary dismissal, the employee is not entitled to any salary or benefits thereof.

Termination agreements, more commonly known as severance agreements, are permissible in Finland. There are no legal provisions or restrictions regarding terminating an employment contract based on a mutual agreement. This kind of practice is rather commonly used in situations where the employer might not yet have legal grounds for termination but is no longer willing to continue the employment relationship.

The amount of the severance pay often starts from the equivalent of the employee's salary for three months. This is due to the fact that when the employee concludes a severance agreement, he or she loses his or her right to unemployment benefits for 90 days. Additionally, employees are often not willing to settle for less than their salary for the applicable notice period and a compensation amounting to at least their salary for three months as the statutory minimum for compensation for illegal dismissal starts from the employee's salary for three months.

Certain groups of employees enjoy special protection against dismissal. Personnel representatives, shop stewards and industrial safety delegates may only be dismissed under exceptional circumstances specified in the legislation. For example, the employer may only terminate the shop steward's employment agreement on individual grounds if the majority of the employees whom the shop steward represents agree. The employment of a shop steward may be terminated on collective grounds only if his or her work ceases to exist completely and the employer is not able to arrange other corresponding or suitable work, or to train the employee for some other work. The protection may even be broader since some collective agreements include provisions that further improve the protection.

Another protected group is employees on family leave. The employer is not entitled to dismiss an employee who is on family leave unless the operations of the employer cease to exist completely. For example, should the employer dismiss a pregnant employee, the dismissal is deemed to have taken place due to pregnancy unless evidence to the contrary is provided by the employer.

Finnish employment legislation does not contain a specified list of adequate grounds for terminating an employment. Therefore, the adequacy of such grounds is finally assessed and decided in the court taking into consideration all the facts of the case. One could say that the courts tend to favour the employees. In general, the risk of an employee representing a claim for wrongful dismissal is quite high. Thus, the grounds for dismissal should always be assessed very carefully in every case.

The grounds for the claim vary depending on whether the termination was carried out on collective or individual grounds. In the case of termination on individual grounds, the claims may relate to, for example, that the employee was dismissed due to another reason than the one noted in the issued warning. On the other hand, in the case of termination on collective grounds, the claims may relate to, for example, that the work has not in reality diminished permanently since shortly after the termination the employer employed another person for similar duties.

Should the court deem that the employer did not have legal grounds to terminate the employment, the employer is ordered to pay the employee compensation for illegal termination. The minimum compensation is equal to three months' and the maximum compensation to 24 months' salary of the dismissed employee. Factors that affect the amount include the length of the employment relationship, the employee's age and possibility to find new employment, and the seriousness of the conduct of the employer.

Anti-discrimination legislation consists of the following main acts: the Employment Contracts Act, the Non-discrimination Act, the Act on Equality between Women and Men, and the Penal Code. These acts prohibit both direct and indirect discrimination in employment.

The employer has a statutory obligation to treat all employees equally unless deviating from this is justified in view of the duties and position of the employees. Furthermore, less favourable terms may not be applied to fixed-term or part-time employments merely because of the duration of the employment; inter alia, the fixed-term employers must be offered the same benefits as regular employees in the same position. The employer also has a duty to promote equality between men and women in working life.

The main statutory provisions prohibit discrimination based on age, ethnic or national origin, nationality, language, religion, belief, opinion, political activity, trade union activity, family ties, state of health, disability, sexual orientation or any other similar personal characteristic. Discrimination may also occur if the employer puts an employee in an unfavourable position as a countermeasure when the employee has complained about or taken action to safeguard equality. Positive discrimination in favour of certain groups may be allowed to some extent if the practices are established to genuinely improve equality in working life and the positive discrimination is justified taking into consideration the requirements of the position and the different treatment is proportionate to achieve the legitimate objective.

The Act on Equality between Women and Men deals with gender-based discrimination. The act prohibits, for example, different treatment of employees due to pregnancy, childbirth, parenthood or other reasons related to family responsibilities. It should be noted that the act does not only consider cases where the employees are of different sex and, thus, an employee may raise claims based on this act stating that he has suffered discrimination due to his fatherhood since another childless male employee was chosen for a position instead of him.

When an employee who considers that he or she has been subject to discrimination presents information from which it may be presumed that discrimination has occurred, the employer must demonstrate the opposite. Thus, a reverse burden of proof is applied in discrimination matters. The employer must be able to show that the reasons for differential treatment have been objectively justified. Therefore, it is essential that the employer has the necessary documentation available to be able to establish afterwards the equal treatment; for example, when choosing one employee over another in a hiring process.

The employee must claim compensation for illegal discrimination within two years of the act of discrimination. Compensation is determined in the form of an indemnity and the law does not set a minimum or maximum amount to the compensation. Accordingly, the compensation must be equitable proportionate to the severity of the act. The employer, or its representative, can also be fined or imprisoned for a maximum of six months for general discrimination or discrimination at work under the Penal Code. Reverse burden of proof is not applied in criminal cases.

An employee who has been discriminated against under the Act on Equality between Men and Women can claim compensation from the employer. The minimum amount of indemnity is currently EUR3,620. No upper limit has been set for the amount of compensation, except for discrimination in employee recruitment situations where the employer is able to prove that the person would not have been employed even if the decision was not made on discriminatory grounds, for which the maximum sum payable is currently EUR18,130.

There is a special court, the Finnish Labour Court, that resolves cases concerning the interpretation of collective agreements. At the Labour Court, the employee trade unions may bring actions against employers’ organisations. The judgment of the court is binding upon all members of the associations involved, and decisions of the Labour Court are final and cannot be appealed.

All other employment disputes are resolved in the civil courts where the District Court is the first instance, the Court of Appeal the second instance and the Supreme Court the highest instance. However, appeals to the Supreme Court are granted only under certain conditions. The court may grant a leave to appeal in cases in which a precedent is necessary for the correct application of the law, an error has taken place in the proceedings before a lower court or another weighty reason exists.

Employees who are trade union members often receive legal assistance from the trade union. Then the employee bears no costs for his or her representation in court, as the costs are borne by the trade union. Employers are often represented by law firms or in some cases by in-house lawyers.

Class actions may not be undertaken by employees. In general, class actions are only allowed in disputes between consumers and one or several businesses, and so far no class actions have been undertaken in Finland.

The employees' period for filing a suit based on the rights provided by the Employment Contracts Act is generally five years but in cases concerning a bodily injury the time limit is ten years. However, legal action relating to the employment relationship of a former employee must generally be initiated within two years of the date on which the employment relationship terminated. Similarly, claims based on the Working Hours Act or the Annual Holidays Act must be made within two years of the end of the calendar year in which such entitlement arose.

Arbitration clauses are typically deemed enforceable in director agreements but not in ordinary employment contracts.

The general rule is that the losing party is liable for all reasonable legal costs incurred by the other party. However, a court may adjust the amount to be paid since a court may order that the parties are liable for their own costs in part or even full, if the legal issues in the case have been so unclear that the losing party has had a justifiable reason to commence the proceedings. Courts also evaluate the necessity of the items in a legal bill, which may lead to an outcome where some costs are seen as unreasonable and will therefore not be ordered to be paid by the losing party.

Dittmar & Indrenius

Pohjoisesplanadi 25 A
FI-00100 Helsinki
Finland

+358 9 681 700

office@dittmar.fi www.dittmar.fi
Author Business Card

Law and Practice

Authors



Dittmar & Indrenius has an employment, benefits & pensions practice that is the leading and one of the largest employment law practices in Finland. Throughout the years, the firm has been engaged in many of the highest-profile employment law cases in the Finnish market. The practice consists of 14 associates and three partners who provide insightful, practical and holistic legal advice to corporate clients. The practice is best known for serving clients in a wide range of complicated employment law issues, ranging from reorganisations to employment disputes, M&A to compensation schemes, collective employment law to posting of employees and pensions to discrimination issues. One of the practice's key strengths is its close co-operation with, for instance, Dittmar & Indrenius' tax, data protection and M&A practices. The firm offers clients 'one-stop shop' legal services and out-of-the-box solutions that are not limited to employment law.

Compare law and practice by selecting locations and topic(s)

{{searchBoxHeader}}

Select Topic(s)

loading ...
{{topic.title}}

Please select at least one chapter and one topic to use the compare functionality.